RAILWAY bosses have issued a stark warning to officers and workers after recording a loss of more than &#xA3;300,000 last year.

Accusing management of being stuck in the 1980s, Ffestiniog Railway chairman Michael Whitehouse said the company had to develop positive thinking, reduce its overheads and debt, and reinvent itself.

In the annual report he said there was too much debt and this restricted choices.

Last year the Ffestiniog Railway reported a gross profit of &#xA3;290,452 but administrative expenses of &#xA3;621,675, up from &#xA3;395,397 the previous year, and &#xA3;21,061 interest payable (up from &#xA3;13,507) contributed to the loss.

Mr Whitehouse told members that in the period to July 2002, money had been spent before it had been earned and non-productive administrative employment had increased considerably.

The company received a &#xA3;45,000 compensation grant for the foot-and-mouth disease outbreak in 2001 during the year.

While the leisure market was increasing, said Mr Whitehouse, it was more demanding.

"It is necessary to invest in pinch-points on the Ffestiniog and the Welsh Highland Railway infrastructure to increase profits and make money," he said.

He added that the company was undercapitalised and consideration was being given to a share issue.

When appointed last year, Mr Whitehouse promised to return the company to profit and to wipe out financial losses of recent years.

Last December the railway had to cut spending and eight jobs were axed.

Company fortunes have since been revived and it is on target to reach its budget profit target of &#xA3;75,000.

Mr Whitehouse said the Ffestiniog Railway increased passenger numbers by 4pc this summer while the Welsh Highland Railway was up 32pc. Income was 12pc up.

The Ffestiniog Railway runs tourist services from Blaenau Ffestiniog to Porthmadog's Harbour Station and is restoring the old Welsh Highland Railway from there to Dinas and Porthmadog. The section from Caernarfon to Waunfawr is already well-established.

Last August a new three-mile section of the Welsh Highland Railway from Waunfawr to Rhyd Ddu was opened.